Exhibit 99.2
GLOBAL MEDICAL REIT INC.
Overview to Unaudited Pro Forma Consolidated Financial Statements
Global Medical REIT Inc. (the “Company,” “our,” “we”) is a Maryland corporation engaged primarily in the acquisition of licensed, state-of-the-art, purpose-built healthcare facilities and the leasing of these facilities to strong clinical operators with leading market share.
The accompanying unaudited pro forma consolidated financial statements have been derived from our historical consolidated financial statements. The unaudited pro forma consolidated balance sheet as of June 30, 2017 is presented to reflect pro forma adjustments as if the Company’s acquisition on September 25, 2017 of the rehabilitation hospital named Central Texas Rehabilitation Hospital and approximately 1.27 acres of adjacent land that has been planned to accommodate the development of a long-term, acute care hospital (collectively the “Austin Facility”), was completed on June 30, 2017. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2017 and the twelve months ended December 31, 2016 are presented as if the acquisition of the Austin Facility on September 25, 2017 was completed on January 1, 2016. The unaudited pro forma consolidated statements of operations for both periods have also been adjusted to reflect the results of operations of the facilities that we acquired during 2016 and 2017 (refer to the “Previously Disclosed Acquisitions” columns) for the period January 1, 2016 through the respective dates of acquisition. A pro forma consolidated balance sheet as of September 30, 2017 is not presented as the acquisition was completed on September 25, 2017 and therefore the balances are included in our historical balances as of September 30, 2017.
The following unaudited pro forma consolidated financial statements should be read in conjunction with (i) our historical unaudited consolidated financial statements as of June 30, 2017 and for the six months ended June 30, 2017, (ii) our audited consolidated financial statements as of December 31, 2016 and for the twelve months ended December 31, 2016, (iii) the “Cautionary Note Regarding Forward-Looking Statements” contained in those filings, and (iv) the “Risk Factors” sections contained in in Amendment No. 2 to our Annual Report on Form 10-K for the year ended December 31, 2016.
We have based the unaudited pro forma adjustments on available information and assumptions that we believe are reasonable. The following unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of what our actual consolidated financial position would have been as of June 30, 2017 assuming the transactions and adjustments reflected therein had been consummated on June 30, 2017 and what our actual consolidated results of operations would have been for the six months ended June 30, 2017 and the twelve months ended December 31, 2016 assuming the transactions and adjustments reflected therein had been completed on January 1, 2016, and additionally are not indicative of our consolidated future financial condition, results of operations, or cash flows, and should not be viewed as indicative of our future consolidated financial condition, results of operations, or cash flows.
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GLOBAL MEDICAL REIT INC.
Pro Forma Consolidated Balance Sheet
(unaudited)
As of June 30, 2017 | ||||||||||||||
Historical (a) | Pro Forma Adjustments | Pro Forma | ||||||||||||
Investment in real estate: | ||||||||||||||
Land | $ | 25,822,453 | 6,957,821 | (b) | $ | 32,780,274 | ||||||||
Building | 306,198,609 | 28,507,662 | (b) | 334,706,271 | ||||||||||
Site improvements | 3,115,289 | 264,634 | (b) | 3,379,923 | ||||||||||
Tenant improvements | 2,996,662 | 1,108,702 | (b) | 4,105,364 | ||||||||||
Acquired lease intangible assets | 18,083,868 | 3,811,181 | (b) | 21,895,049 | ||||||||||
356,216,881 | 40,650,000 | 396,866,881 | ||||||||||||
Less: accumulated depreciation and amortization | (7,386,209 | ) | - | (7,386,209 | ) | |||||||||
Investment in real estate, net | 348,830,672 | 40,650,000 | 389,480,672 | |||||||||||
Cash | 12,033,797 | (92,435 | ) | (c)(d) | 11,941,362 | |||||||||
Restricted cash | 2,291,080 | - | 2,291,080 | |||||||||||
Tenant receivables | 534,484 | - | 534,484 | |||||||||||
Escrow deposits | 979,709 | - | 979,709 | |||||||||||
Deferred assets | 1,867,010 | - | 1,867,010 | |||||||||||
Deferred financing costs, net | 2,770,144 | - | 2,770,144 | |||||||||||
Other assets | 88,695 | - | 88,695 | |||||||||||
Total assets | $ | 369,395,591 | 40,557,565 | $ | 409,953,156 | |||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||
Liabilities: | ||||||||||||||
Revolving credit facility | $ | 144,500,000 | 40,650,000 | (d) | $ | 185,150,000 | ||||||||
Notes payable, net of unamortized discount of $995,990 at June 30, 2017 | 38,478,910 | 38,478,910 | ||||||||||||
Accounts payable and accrued expenses | 2,216,953 | - | 2,216,953 | |||||||||||
Dividends payable | 3,700,936 | - | 3,700,936 | |||||||||||
Security deposits | 2,444,842 | - | 2,444,842 | |||||||||||
Due to related parties, net | 638,790 | - | 638,790 | |||||||||||
Acquired lease intangible liability, net | 1,112,566 | - | 1,112,566 | |||||||||||
Total liabilities | 193,092,997 | 40,650,000 | 233,742,997 | |||||||||||
Stockholders' equity: | ||||||||||||||
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding | - | - | - | |||||||||||
Common stock $0.001 par value, 500,000,000 shares authorized at June 30, 2017, 21,105,675 shares issued and outstanding at June 30, 2017 | 21,106 | - | 21,106 | |||||||||||
Additional paid-in capital | 202,513,240 | - | 202,513,240 | |||||||||||
Accumulated deficit | (26,231,752 | ) | (92,435 | ) | (c) | (26,324,187 | ) | |||||||
Total stockholders' equity | 176,302,594 | (92,435 | ) | 176,210,159 | ||||||||||
Total liabilities and stockholders' equity | $ | 369,395,591 | 40,557,565 | $ | 409,953,156 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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GLOBAL MEDICAL REIT INC.
Pro Forma Consolidated Statement of Operations
(unaudited)
For the Six Months Ended June 30, 2017 | ||||||||||||||||||||
Historical (a) | Previously Disclosed Acquisitions (b) | Historical plus Previously Disclosed Acquisitions | Austin Facility Pro Forma | Pro Forma | ||||||||||||||||
Revenue | ||||||||||||||||||||
Rental revenue | $ | 11,295,797 | 4,208,180 | 15,503,977 | 1,649,430 | (c) | $ | 17,153,407 | ||||||||||||
Expense recoveries | 697,639 | 17,332 | 714,971 | - | 714,971 | |||||||||||||||
Other income | 88,368 | - | 88,368 | - | 88,368 | |||||||||||||||
Total revenue | 12,081,804 | 4,225,512 | 16,307,316 | 1,649,430 | 17,956,746 | |||||||||||||||
Expenses | ||||||||||||||||||||
Acquisition fees | 1,478,542 | - | 1,478,542 | - | (d) | 1,478,542 | ||||||||||||||
General and administrative | 3,428,589 | - | 3,428,589 | - | 3,428,589 | |||||||||||||||
Operating expenses | 769,733 | 17,332 | 787,065 | - | 787,065 | |||||||||||||||
Management fees – related party | 1,255,521 | - | 1,255,521 | - | 1,255,521 | |||||||||||||||
Depreciation expense | 3,196,640 | 1,035,904 | 4,232,544 | 383,400 | (e) | 4,615,944 | ||||||||||||||
Amortization expense | 802,908 | 203,847 | 1,006,755 | 186,030 | (f) | 1,192,785 | ||||||||||||||
Interest expense | 3,090,579 | 1,485,457 | 4,576,036 | 725,722 | (g) | 5,301,758 | ||||||||||||||
Total expenses | 14,022,512 | 2,742,540 | 16,765,052 | 1,295,152 | 18,060,204 | |||||||||||||||
Net loss | $ | (1,940,708 | ) | 1,482,972 | (457,736 | ) | 354,278 | $ | (103,458 | ) | ||||||||||
Net loss per share – Basic and Diluted | $ | (0.11 | ) | - | - | - | $ | (0.01 | ) | |||||||||||
Weighted average shares outstanding – Basic and Diluted | 17,624,906 | - | - | - | 17,624,906 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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GLOBAL MEDICAL REIT INC.
Pro Forma Consolidated Statement of Operations
(unaudited)
For the Year Ended December 31, 2016 | ||||||||||||||||||||
Historical (a) | Previously Disclosed Acquisitions (b) | Historical plus Previously Disclosed Acquisitions | Austin Facility Pro Forma | Pro Forma | ||||||||||||||||
Revenue | ||||||||||||||||||||
Rental revenue | $ | 8,079,555 | 22,997,883 | 31,077,438 | 3,298,860 | (c) | $ | 34,376,298 | ||||||||||||
Other income | 130,775 | - | 130,775 | - | 130,775 | |||||||||||||||
Total revenue | 8,210,330 | 22,997,883 | 31,208,213 | 3,298,860 | 34,507,073 | |||||||||||||||
Expenses | ||||||||||||||||||||
Acquisition fees | 1,568,470 | - | 1,568,470 | - | (d) | 1,568,470 | ||||||||||||||
Acquisition fees – related party | 754,000 | - | 754,000 | - | 754,000 | |||||||||||||||
General and administrative | 4,218,807 | - | 4,218,807 | - | 4,218,807 | |||||||||||||||
Operating expenses | 72,615 | - | 72,615 | - | 72,615 | |||||||||||||||
Management fees – related party | 1,434,294 | - | 1,434,294 | - | 1,434,294 | |||||||||||||||
Depreciation expense | 2,334,664 | 6,257,715 | 8,592,379 | 766,800 | (e) | 9,359,179 | ||||||||||||||
Amortization expense | 42,322 | 2,059,224 | 2,101,546 | 372,060 | (f) | 2,473,606 | ||||||||||||||
Interest expense | 4,138,608 | 7,190,030 | 11,328,638 | 1,451,443 | (g) | 12,780,081 | ||||||||||||||
Total expenses | 14,563,780 | 15,506,969 | 30,070,749 | 2,590,303 | 32,661,052 | |||||||||||||||
Net (loss) income | $ | (6,353,450 | ) | 7,490,914 | 1,137,464 | 708,557 | $ | 1,846,021 | ||||||||||||
Net (loss) income per share – Basic and Diluted | $ | (0.68 | ) | - | - | - | $ | 0.20 | ||||||||||||
Weighted average shares outstanding – Basic and Diluted | 9,302,244 | - | - | - | 9,302,244 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
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GLOBAL MEDICAL REIT INC.
Notes to the Unaudited Pro Forma Consolidated Financial Statements
Note 1 — Overview of Unaudited Pro Forma Consolidated Financial Statements Presented
The accompanying unaudited pro forma consolidated balance sheet and unaudited pro forma consolidated statements of operations for Global Medical REIT Inc. (the “Company”) presents the pro forma impact of the acquisition of the rehabilitation hospital named Central Texas Rehabilitation Hospital and approximately 1.27 acres of adjacent land that has been planned to accommodate the development of a long-term, acute care hospital (collectively the “Austin Facility”). The unaudited pro forma consolidated statements of operations have also been adjusted to reflect the results of operations of the facilities that we acquired during 2016 and 2017 (refer to the “Previously Disclosed Acquisitions” columns) for the period January 1, 2016 through the respective dates of acquisition. On September 25, 2017, the Company acquired the Austin Facility and assumed the existing absolute triple-net lease agreement with a remaining term of approximately 9.6 years, subject to four, five-year renewal options by the tenant. The purchase price for Austin Facility was $40.65 million and was funded using borrowings from the Company’s revolving credit facility.
Unaudited Pro Forma Consolidated Balance Sheet
The accompanying unaudited Pro Forma Consolidated Balance Sheet assumes the acquisition was completed on June 30, 2017. Pro forma adjustments include only adjustments that give effect to events that are directly attributable to the transaction and factually supportable regardless of whether they have a continuing impact or are nonrecurring.
All pro forma adjustments are presented on the face of the accompanying unaudited Pro Forma Consolidated Balance Sheet.
Unaudited Pro Forma Consolidated Statements of Operations
The accompanying unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2017 and the year ended December 31, 2016, assumes the acquisition of the Austin Facility and all “Previously Disclosed Acquisitions” were completed on January 1, 2016 and the effect of all adjustments are computed through the end of the six and twelve month periods presented. Pro forma adjustments include only adjustments that give effect to events that are (i) directly attributable to the transaction, (ii) expected to have a continuing impact on the registrant, and (iii) factually supportable.
All pro forma adjustments are presented on the face of the accompanying unaudited Pro Forma Consolidated Statements of Operations for each period presented.
Note 2 — Unaudited Pro Forma Consolidated Balance Sheet Adjustments
(a) | This column represents the historical amounts contained in the Company’s Consolidated Balance Sheet as of June 30, 2017 as presented in its Form 10-Q as of June 30, 2017. However, in this unaudited Pro Forma Consolidated Balance Sheet the Company made a reclassification to the historical line item “Acquired Lease Intangible Assets, Net” to present gross intangible assets acquired as part of its business combination transactions as a separate line item within the category “Investment in Real Estate.” The Company also reclassified the related historical accumulated amortization balance on these intangible assets acquired to the line item “Accumulated Depreciation and Amortization.” This reclassification was made to conform to the Company’s presentation of those balances as contained in its Form 10-Q as of September 30, 2017. |
(b) | Represents the preliminary fair value purchase price allocation for the $40.65 million paid to acquire the Austin Facility, completed in accordance with the provisions of Accounting Standards Codification Topic 805, Business Combinations. |
(c) | Represents cash paid for acquisition expenses incurred related to the acquisition of the Austin Facility. |
(d) | Represents $40.65 million in borrowings the Company received from its revolving credit facility that were used to fund the acquisition. There was no pro forma net impact on the Company’s cash balance from the borrowing as the funds received were immediately used to acquire the Austin Facility. |
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Note 3 — Unaudited Pro Forma Consolidated Statement of Operations Adjustments – Six Months Ended June 30, 2017
(a) | This column represents the historical amounts contained in the Company’s Consolidated Statement of Operations for the six months ended June 30, 2017 as presented in its Form 10-Q for the quarter ended June 30, 2017. However, in this unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2017, the Company made a reclassification to the historical presentation to include the expense line item “Operating Expenses” which primarily includes both reimbursable property operating expenses that the Company pays on behalf of certain of its tenants, including real estate taxes and insurance, non-reimbursable property operating expenses, and other operating expenses. The Consolidated Statement of Operations contained in the Company’s Form 10-Q as of June 30, 2017 included these expenses in the “General and Administrative” expense line item. This reclassification was made to conform to the Company’s presentation of those amounts as contained in its Form 10-Q as of September 30, 2017. |
(b) | This column presents the results of operations for acquisitions that were completed during the six months ended June 30, 2017 as if the acquisitions occurred on January 1, 2016. The facilities acquired and the acquisition completion dates are listed in the table below: |
2017 Acquisitions: | ||||||
Facility | Date Acquired | Facility | Date Acquired | |||
Cape Coral | January 10, 2017 | Great Bend | March 31, 2017 | |||
Lewisburg | January 12, 2017 | Oklahoma City | March 31, 2017 | |||
Las Cruces | February 1, 2017 | Sandusky | April 21, 2017 | |||
Prescott | February 9, 2017 | Flower Mound | June 27, 2017 | |||
Clermont | March 1, 2017 | Brockport | June 27, 2017 | |||
Sandusky | March 10, 2017 | Sherman | June 30, 2017 |
(c) | Represents rental revenue earned on the lease. |
(d) | The Company incurred approximately $92,500 of acquisition expenses related to the acquisition of the Austin Facility. These expenses will not have a continuing impact on the Company and therefore do not qualify as a pro forma adjustment. |
(e) | Represents depreciation expense incurred on the building using an estimated remaining useful life of 45 years, on the site improvements over their estimated remain life of 15 years and on the tenant improvements over the remaining lease term of approximately 9.6 years. |
(f) | Represents amortization expense incurred on the acquired lease intangible assets computed over the remaining lease term of approximately 9.6 years |
(g) | Represents interest expense incurred on the borrowings from the revolving credit facility used to fund the acquisition at an interest rate of 3.49%, as well as the amortization of the related deferred financing costs. |
Note 4 — Unaudited Pro Forma Consolidated Statement of Operations Adjustments – Year Ended December 31, 2016
(a) | This column represents the historical amounts contained in the Company’s Consolidated Statement of Operations for the year ended December 31, 2016 as presented in its Form 10-K for the year ended December 31, 2016. However, in this unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2016, the Company made a reclassification to the historical presentation to include the expense line item “Operating Expenses” which includes property operating expenses. The Consolidated Statement of Operations contained in the Company’s Form 10-K for the year ended December 31, 2016 included these expenses in the “General and Administrative” expense line item. This reclassification was made to conform to the Company’s presentation of those amounts as contained in its Form 10-Q as of September 30, 2017. |
(b) | This column presents the results of operations for acquisitions that were completed during year ended December 31, 2016 and the six months ended June 30, 2017 as if the acquisitions occurred on January 1, 2016. The facilities acquired and the acquisition completion dates are listed in the table below: |
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2017 Acquisitions: | ||||||
Facility | Date Acquired | Facility | Date Acquired | |||
Cape Coral | January 10, 2017 | Great Bend | March 31, 2017 | |||
Lewisburg | January 12, 2017 | Oklahoma City | March 31, 2017 | |||
Las Cruces | February 1, 2017 | Sandusky | April 21, 2017 | |||
Prescott | February 9, 2017 | Flower Mound | June 27, 2017 | |||
Clermont | March 1, 2017 | Brockport | June 27, 2017 | |||
Sandusky | March 10, 2017 | Sherman | June 30, 2017 |
2016 Acquisitions: | ||||||
Facility | Date Acquired | Facility | Date Acquired | |||
Plano | January 28, 2016 | Watertown | September 30, 2016 | |||
Westland | March 31, 2016 | Sandusky | October 7, 2016 | |||
Melbourne | March 31, 2016 | Carson City | October 31, 2016 | |||
Reading | July 20, 2016 | Ellijay | December 16, 2016 | |||
East Orange | September 29, 2016 | HealthSouth | December 20, 2016 |
(c) | Represents rental revenue earned on the lease. |
(d) | The Company incurred approximately $92,500 of acquisition expenses related to the acquisition of the Austin Facility. These expenses will not have a continuing impact on the Company and therefore do not qualify as a pro forma adjustment. |
(e) | Represents depreciation expense incurred on the building using an estimated remaining useful life of 45 years, on the site improvements over their estimated remain life of 15 years and on the tenant improvements over the remaining lease term of approximately 9.6 years. |
(f) | Represents amortization expense incurred on the acquired lease intangible assets computed over the remaining lease term of approximately 9.6 years. |
(g) | Represents interest expense incurred on the borrowings from the revolving credit facility used to fund the acquisition at an interest rate of 3.49%, as well as the amortization of the related deferred financing costs. |
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GLOBAL MEDICAL REIT INC.
Pro Forma Statement of Taxable Operating Results and Cash to be Made Available by Operations
(unaudited)
The following represents an estimate of the taxable operating results and cash to be made available by operations of the Company based upon the unaudited pro forma consolidated statement of operations for the year ended December 31, 2016. These estimated results do not purport to represent results of operations for the Company in the future and were prepared based on the assumptions outlined in the unaudited pro forma consolidated statement of operations, which should be read in conjunction with this statement.
Net income | $ | 1,846,021 | ||
Net book depreciation in excess of tax depreciation | 448,152 | |||
Net book amortization in excess of tax amortization | 2,087,255 | |||
Tax expenditures capitalized in excess of book expenditures | 4,483,005 | |||
Other book / tax differences | (918,615 | ) | ||
Estimated taxable operating income | 7,945,818 | |||
Adjustments: | ||||
Depreciation | 9,359,179 | |||
Net book depreciation in excess of tax depreciation | (448,152 | ) | ||
Amortization | 2,473,606 | |||
Net book amortization in excess of tax amortization | (2,087,255 | ) | ||
Estimated cash to be made available from operations | $ | 17,243,196 |
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